Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cholamandalam Investment and Finance Co Ltd (BOM:511243, Financial) reported a 33% year-on-year increase in total Assets Under Management (AUM), reaching INR1,77,426 crores.
- The company's net income for the quarter rose by 37% year-on-year to INR3,238 crores, and by 40% for the half-year to INR6,271 crores.
- The loan against property business saw a significant growth of 35% in disbursements for Q2, and 39% for the half-year.
- The company maintains a strong liquidity position with a cash balance of INR13,864 crores at the end of September.
- Cholamandalam's capital adequacy ratio stands at 19.5%, well above the regulatory requirement of 15%.
Negative Points
- Asset quality showed some deterioration with stage three levels increasing to 2.83% as of September 2024 from 2.62% in June 2024.
- Gross Non-Performing Assets (GNPA) increased to 3.78% as of September 2024, up from 3.62% in June 2024.
- The company's credit cost guidance indicates a potential challenge in maintaining lower levels, with expectations to reduce from 1.5% to 1.3% by year-end.
- There is a noted increase in operating expenses due to a substantial addition of 7,000 employees, impacting the cost structure.
- The vehicle finance segment experienced a slowdown, attributed to lower truck utilization and economic factors affecting demand.
Q & A Highlights
Q: Can you provide insights into the asset quality for Vehicle Finance (VF) and Consumer and Small Enterprise Loans (CSEL), and how are these segments performing compared to last year?
A: Asset quality in vehicle finance has seen a slight increase in stage three levels due to seasonal factors like heatwaves and extended rains. We expect this to stabilize in the current quarter and improve in the next. For CSEL, the non-performing levels are within a range of 4.25% to 5%, and we are expanding product lines to manage this. (Ravindra Kundu, Executive Director)
Q: With the RBI cautioning on growth, how is Cholamandalam adjusting its growth strategy?
A: We have moderated our disbursement growth to 13% for the quarter, reflecting a conscious decision to align with regulatory expectations and internal discussions. This moderation will continue as base effects wear off. (Vellayan Subbiah, Non-Executive Chairman)
Q: What is the outlook for the auto cycle and festive season demand, especially in vehicle finance?
A: The demand for small commercial vehicles has been impacted by rural economic conditions and seasonal factors. However, we expect an uptick in retail sales as dealers clear inventories. The festive season demand is expected to improve post-harvest and with increased construction activities. (Ravindra Kundu, Executive Director)
Q: How is the company managing its operating expenses and employee additions?
A: Operating expenses are stable at 3%, with employee additions balanced between sales and collections. We are expanding product lines and geographies, which necessitates hiring. Productivity is expected to improve as market conditions stabilize. (Ravindra Kundu, Executive Director)
Q: Can you discuss the impact of RBI's directive on foreclosure charges for the MSME book?
A: The directive primarily affects foreclosures from own funds for personal purposes. Our business loans are not significantly impacted, as we charge for balance transfers but not for foreclosures from own funds. (Unidentified Company Representative)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
